Original Medicare has no limit on what you can spend out of pocket in a year. That 20% coinsurance on Part B services continues indefinitely, which is why a major surgery or serious illness can result in a five-figure bill even with Medicare. Medicare Advantage plans are required by law to include an annual out-of-pocket maximum, or MOOP, that caps your exposure. Understanding how this works, what counts toward it, and what does not is essential to evaluating any Advantage plan.
The MOOP is the number I focus on first when comparing Advantage plans for someone with significant health needs. A $0 premium plan with an $8,000 MOOP is a very different product from a $0 premium plan with a $3,500 MOOP. If you have an expensive year, the difference is $4,500 coming out of your pocket. Premiums are what everyone looks at. The MOOP is what actually matters.
What the out-of-pocket maximum is
The maximum out-of-pocket, sometimes called the MOOP, is the most you can pay in cost-sharing for covered in-network services during a calendar year. CMS sets a ceiling on how high this can be. For 2025, the federal maximum allowed is $8,850 for in-network services. Once you reach that limit, the plan pays 100% of covered in-network costs for the rest of the year. Many plans set their MOOP lower than the federal maximum, which can be a significant benefit if you have substantial healthcare needs.
In-network vs out-of-network limits
Most Medicare Advantage plans have a separate, higher out-of-pocket limit for out-of-network services. PPO plans typically allow out-of-network care at higher cost-sharing, and the combined in and out-of-network MOOP can be significantly higher than the in-network limit alone. HMO plans generally do not cover out-of-network care except in emergencies, so there is typically no out-of-network MOOP to worry about, but also no out-of-network coverage.
What counts toward the MOOP
Your cost-sharing payments for Medicare-covered services received in-network count toward the out-of-pocket maximum. This includes copays for doctor visits, specialist visits, urgent care, outpatient procedures, and coinsurance for hospital stays. Each dollar you pay in covered cost-sharing accumulates toward the limit.
What does not count toward the MOOP
Monthly premiums do not count. Neither does the Part B deductible. Extra benefits like dental, vision, and hearing services are generally not included unless the service is also Medicare-covered. Prescription drug costs under Part D do not count toward the medical out-of-pocket maximum, though Part D has its own separate cost-sharing structure and a $2,000 out-of-pocket cap for 2025.
Want to compare Advantage plans by their real total cost?
The out-of-pocket maximum is one of the most important numbers in any Advantage plan, but it rarely gets the attention it deserves. I compare total cost, not just premium, when I run plans for my clients.
Book a Free CallWhy a lower MOOP is not always better
Plans with the lowest out-of-pocket maximums often charge higher monthly premiums or have more restrictive networks to offset the risk they are accepting. A plan with a $3,400 MOOP might cost $120 per month in premium, while a plan with a $6,700 MOOP might cost $0 per month. If you stay relatively healthy, the high-MOOP plan costs you nothing in premium and nothing in services. If you have a catastrophic year, the low-MOOP plan protects you better but at the cost of monthly premiums you pay regardless. The right answer depends on your health situation and risk tolerance.
Comparing to Original Medicare
Original Medicare has no out-of-pocket maximum whatsoever. Without Medigap, your 20% share of Medicare-covered services has no ceiling. A $500,000 hospital stay means a $100,000 bill under Original Medicare alone. This is the primary financial risk of Original Medicare without supplemental coverage, and it is why most people either add Medigap (which functions as an effective cap) or choose Medicare Advantage (which provides a statutory cap).
Frequently asked questions